Latest SPIVA Report for Canada Shows Small Cap Funds Fare Better
TORONTO, March 1 /CNW/ - Actively managed mutual funds in the Canadian
equity and U.S. equity fund categories lagged indices in the last quarter of
2006, Standard & Poor's, the leading provider of independent investment
research, ratings, and indices, said today. According to the Standard & Poor's
Indices Versus Active Funds Scorecard (SPIVA) for Canada, just 36.4% of
Canadian equity funds beat the S&P/TSX Composite Index, while only 28.4% of
U.S. equity funds outperformed the S&P 500 Index (measured in Canadian
dollars). In contrast, 65.9% of actively managed Canadian small-cap equity
funds outpaced the S&P/TSX SmallCap Index.
"Looking over longer time periods, indices continue to outperform a
majority of active funds," said Steve Rive, vice president of Canadian Index
Services at Standard & Poor's. "Over the last five years, less than 11% of
actively managed Canadian equity funds have beat the S&P/TSX Composite Index."
In the same five-year period ended Dec. 31, 2006, only 14.5% of U.S.
equity funds have outpaced the S&P 500 Index, while 46.5% of actively managed
Canadian small-cap funds have outperformed the S&P/TSX SmallCap Index.
Five-year average fund returns to the end of 2006 show active funds have
underperformed the S&P/TSX Composite Index and the S&P/TSX Capped Composite,
both on an equal-and asset-weighted basis, by roughly 300 basis points.
A key attribute of the SPIVA methodology is its correction for
survivorship bias, which can significantly skew results as funds liquidate or
merge. The five-year survivorship is about 60% for the Canadian equity and
Canadian small-cap mutual fund categories, meaning that almost 40% of funds in
these categories has merged or liquidated in the past five years. For the U.S.
equity fund category, during the same period, survivorship is only 42%. In
other words, out of the total funds in this category that existed five years
ago, less than half remain today.
The SPIVA methodology is designed to provide an accurate and objective
apples-to-apples comparison of funds' performance versus their appropriate
style indices, correcting for factors that have skewed results in previous
index-versus-active analyses in the industry. SPIVA scorecards show both
asset- and equal-weighted averages and include survivorship bias correction to
account for funds that may have merged or been liquidated during the period
under study. Fund categorizations are as defined by the Canadian Investment
Funds Standards Committee (CIFSC), and fund data is drawn from Fundata's
mutual fund database.
The SPIVA Scorecard for Canada is issued quarterly by Standard & Poor's.
The complete year-end SPIVA Canada scorecard is available on
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For further information: Rachel Shain, Standard & Poor's, (416)
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